Good Decisions Require Good Information

To make good decisions, boards need to rely upon good information, but it is easier said than done.  First of all, businesses are extremely complex.  It is very hard for outside directors to be able to understand all of the nuances of today’s businesses. Recently, a CEO of one of world’s largest financial institutions told me that it would be “impossible for an outside director to understand all the ramifications of their business” because it was “even difficult for the people who are on the inside” to do that.

Secondly, given the complexity of the business, the CEO and her staff must learn to focus information on issues with which the board is concerned, at the same time providing a greater spectrum of information on which the decisions to focus information are based.  There is always a question of whether a CEO’s subordinates are willing to speak truth to power, and it can devalue the information provided to the board.   The board must create an environment in which unpleasant truths can be delivered without the proverbial shooting of the messenger.

Lastly, the information that in fact is presented to the board needs to be presented in a way that the board members can highlight the issues on which they need to make judgments.  Too frequently, management presents the issues in a way that they understand it from an operational perspective without considering the need to explain it in a different way to make it more understandable to the board.